Even with cuts, public pension crisis looms

You've read the reports, you see the weekly updates and you understand the issue: State pension systems across the U.S. are in serious trouble, so much so that California has adopted cost containment measures and Illinois - if leaders can ever agree to meet to discuss the issue - suffers from teacher and worker pension issues so broad that the state's credit rating has dropped as a result.

Now, even worse news, in a piece featured on the front page of the Wall Street Journal this weekend: Even with austerity measures from coast to coast, state pension systems still face nearly a trillion dollars' worth of funding shortfalls.

As the piece explains, despite number-crunching, benefits cuts and rollbacks for public employees in 45 states, there's been very little progress in helping to address the nearly $900 billion in pension deficits.

Boston College research suggests that those austerity measures have only cut about $100 billion from the pension deficit catastrophe; four years' worth of declining investment returns - including 2011, which saw some major retirement funds such as the massive CALPERS system in California generate less than a 1 percent gain on billions and billions of holdings - have only helped to cement the problem.

And recent cost-cutting measures taken, the Journal reports, mostly only apply to new hires, meaning that the savings benefits won't come until years in the future - with current employees still poised to receive benefits at normal rates.

But employee unions and general feelings that pensions are the vested rights of longtime workers have also made it difficult for governments to make cuts to anything but future benefits. In the case of California, a first effort will be an attempt to get employees to contribute a larger portion of their own income to any retirement savings plan they are enrolled in.

Other states have taken action by cutting annual cost-of-living increases, with Rhode Island and New Jersey making steps and Colorado and Minnesota having successfully taken the issue to the courts.

Ohio has also made changes which hit both current and already retired workers, in addition to newly hired employees. The passage of the cuts follows a year of bitter battles by labor unions, who finally conceded this year that retirement benefits need to be curtailed to help the state meet its budget.

"It is a tough pill to swallow," teacher and union president Kevin Griffin told the Journal. "We had to make the math work. It came down to a question of whether there will be a pension there for me when I retire or not."